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Health Care Reform: What to do now

Employers now have less than a year to prepare for the arrival of the core of the Patient Protection and Affordable Care Act, which requires employers with 50 or more full-time employees to offer medical coverage or pay a penalty. The decision isn’t an easy one and it has complications.

First thing to know –

Will you be in the 50+FTE category?

Once you know that answer it will a lot easier to determine your next steps. Any employer with 50 or more full-time equivalents (FTE) is considered a large employer. If you fall into this category you need to start looking at the issues in more depth now to allow several months for your planning window.

Smaller employers with less than 50 FTEs will be exempt from the employer coverage “mandate” which starts in 2014. While they should still gather information to understand how changes will impact them, the real need for change will be further down the road. These employers will not be subject to either of the two penalties described below.  Their employees will be eligible for coverage in the new Insurance Marketplace (formerly referred to as the Exchange).

Who is a full-time employee?

For purposes of the penalties under the employer shared responsibility mandate, full-time is defined as an employee that works an average of 30 hours or more a week.

Beginning in 2014, applicable large employers (i.e., those with 50 or more full-time employees) will pay penalties if they fail to offer health coverage to full-time employees or offer coverage that is either unaffordable or that does not provide minimum value. These penalties can be significant.

Two types of penalties will be imposed starting in 2014: the “no coverage” penalty and the “unaffordable coverage” penalty.

No Coverage Penalty: Applies if an applicable large employer fails to offer each of its full-time employees (and their dependents) group health coverage and at least one full-time employee receives premium assistance to purchase health coverage through a health insurance exchange.

No Coverage Penalty Amount: $166.67 per month for each full-time employee ($2,000 per year), excluding the first 30 such employees from the calculation.

So an employer of 75 FTE employees could pay a penalty of (75-30=45 times $2000 or $90,000).

Unaffordable Coverage Penalty: Applies if the health coverage offered by an applicable large employer is unaffordable or does not provide minimum value and at least one full-time employee receives premium assistance to purchase health coverage through a health insurance exchange.

Unaffordable Coverage Penalty Amount: $250 per month for each full-time employee receiving premium assistance ($3,000 per year), but not to exceed the amount of the no coverage penalty calculated for that month.

Who Can Enroll for Coverage in the new Insurance Marketplace (formerly known as the Exchange)?

Only individuals who don’t have access to affordable coverage that provides minimum value (as defined by the law) group health insurance OR who are not eligible for any government-sponsored coverage (i.e., Medicaid or Medicare).  Only individuals who meet income guidelines (phases out at 400% of the federal poverty level) will be eligible for subsidies to reduce the cost of this coverage in the Insurance Marketplace.

We know 2013 will be a year of learning to understand the changes imposed by health care reform and the confusion that comes out of it. Both government and industry groups will be issuing new information as the year moves on, and in many cases it will cause a rush of decisions. So we are helping clients understand when and how the decision might have to be made. It is not clear cut at this point.

Most people will need to learn to be flexible plus find a trusted advisor to lead them through the maze that has been created.

Mick Sibbel, Group Benefits
[email protected]